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Measure of Success

Many people I know view financial success as the ability to have enough money that you don’t ever have to worry about it. Really though, should you ever stop worrying and thinking about money, no matter how much you have?

No one likes living from paycheck to paycheck, but even if you make ample money to cover your bills – you should still have a budget. For some, budgeting sounds like something only those with little money do. In reality, this couldn’t be further from the truth.

Success with money is not measured by how much you have in your bank account each month. Success should be measured with how well you use your money. Even if you are super rich, you have to decide what to do with all that extra money.

When your income situation changes, your budget should adjust – but not go away. Play with the numbers in each category, maybe even adding a few extra categories in the process. One certain sign of financial success is having enough each month to distribute to all your basic necessities, plus some extra to use for fun saving categories and future investments.

Money sitting in a checking account or even a standard savings account can be the worst choice. Once you have an emergency fund set up, your extra money should start going into smarter places – like mutual funds, CDs, or bonds. These other financial assets can help you save for something special like a new home or grand vacation, but they are not nearly as liquid as your standard bank accounts. Therefore, you do need a good budget to determine how much of your money should be invested vs. how much needs to be available for bills and emergencies.

Once you have a good balance of money available and money invested, that is a better measure of success. Never toss away that budget. As your financial situation improves, your budgeting process should stay the same. Just the numbers will change.